2020 Global Energy Forum
Pathways to Net Zero
Shaikh Nawaf Al-Sabah,
Chief Executive Officer,
Kuwait Foreign Petroleum Exploration Company
Ahmed Ali Attiga,
Chief Executive Officer,
President and CEO,
King Abdullah Petroleum Studies and Research Center
Deputy Director, Climate and Advanced Energy, Global Energy Center, Atlantic Council
Location: Abu Dhabi, United Arab Emirates
Time: 8:00 a.m. Local
Date: Saturday, January 11, 2020
ANNOUNCER: Ladies and gentlemen, please welcome to the stage deputy director of climate and advanced energy of the Atlantic Council’s Global Energy Center, David Livingston. (Applause.)
DAVID LIVINGSTON: Hello, again. Good afternoon. Welcome. We’re bringing the day closer and closer to a close. And we have a lot to build off of. And I hope that this panel is going to build off of a lot of what has been discussed previously, and what we’re going to discuss over the coming day when it comes to how we finance the transition, what exactly net zero means, the role of gas, et cetera. This panel, “Pathways to Net Zero,” is one I’m very, very excited about, if for no other reason that I think it’s going to be difficult to tread already charted territory with this panel.
We’re really tackling a trend, a phenomena which is evolving in real time. In many ways, it was catalyzed by the U.N. IPCC’s, the U.N. climate body’s, recent report on meeting 1.5 degrees of warming, what it would take to keep warming to under 1.5 degrees. And it set forth in many ways a new sense of urgency, and a new set of pressures of industry and on the energy sector to articulate a credible pathway in order to meet or get as close as possible to that 1.5-degree target, and to reach net zero emissions at some point in the coming decades.
We’ve seen this on the part now of companies that are beginning to articulate their own climate strategies in the framework of net zero, and when it will be achieved, and now. We see it on the part of countries – from the U.K. enshrining a net zero strategy into law so that it is not just aspiration, but it is something which they will be required to be committed to. We see it most recently as well from the European Union. It’s also a topic of vibrant debate where I’m coming from, in the United States and in our very vigorously contested presidential campaign, which will play out this year.
And so I am extremely excited to carry this conversation here to the region as well to make it a truly global one, and to go across sectors, across geographies, to discuss exactly how the private sector, how energy companies are responding to this net zero imperative, and how they are articulating it and metabolizing it as part of their own long-term corporate strategies. So please join me in welcoming to the stage our very, very distinguished panel today.
First, Shaikh Nawaf Al-Sabah, chief executive officer of Kuwait Foreign Petroleum Exploration Company. (Applause.) Ahmed Ali Attiga, chief executive officer of Arab Petroleum Investments Corporation, APICORP. (Applause.) Meg Gentle, president and CEO of Tellurian, Inc. (Applause.) And Adam Sieminski, president of the King Abdullah Petroleum Studies and Research Center in Riyadh, Saudi Arabia. (Applause.)
Shaikh Nawaf, I want to start with you. And the reason is because so many of the discussions that I’m privy to about the oil and gas sector’s engagement with the net zero dialogue is really about IOCs. And I’m curious about how an NOC grapples with the net zero discussion, the net zero debate, and with the pressures that the sector writ large is facing. What does an NOC have to say about that? How does it figure into your strategy?
SHAIKH NAWAF AL-SABAH: Thanks, David. NOC’s look at things differently, even amongst ourselves. But one way to look at it from our perspective as a Kuwait NOC, I would say without speaking too much out of turn, but I’d say some of our brethren in the Gulf, certainly in the Emirates and the Kingdom of Saudi Arabia probably look at it the same way. And that is when we look at the various scenarios for net zero, for what the future decades will look like, in any scenario you look at, oil will remain a part and a strong part of the energy mix. So then the question comes to us is, who’s oil will remain part of that energy mix? And we want to be in a position where it is ours, for two reasons.
One, from a cost perspective. On a cost curve, you know, everybody looks at where barrels fall under the cost curve. We’re always at the bottom of the cost curve in terms of the economically efficient production of hydrocarbons. God’s blessed this region, and specifically this country and others, with low-cost production. But also, more and more we’re looking at where do we fall under the carbon intensity curve? And right now, specifically the three countries I just mentioned, are pretty much at the bottom of the carbon intensity curve, which is a great place to be.
Part of that is due to the very fact that many of our major giant fields that have been producing for decades – Burgan has – in Kuwait – has been producing for eight decades now – still in the primary production phase. Really starting – only starting to think about moving into the secondary production EOR phases. As we move into EOR, as we move into the secondary phase production, that’s where you start using more and more energy to produce a barrel. We are —we want to maintain that focus, not only just on actual cash cost but also on carbon intensity, to lower the energy intensity that’s used to produce heavier oil, that is going to be part of our future production, and also the EOR processes that are used elsewhere in the world, where those barrels are much, much higher now on the – on the carbon intensity curve. So our focus really is going to be on carbon intensity, to maintain production that is the core of that hydrocarbon segment of the energy mix for the decades in the future.
MR. LIVINGSTON: Excellent, thank you. Let me stay in the region and turn to Ahmed. APICORP has been a major advocate of private sector development in the region. What role does the private sector have, as opposed to governments, in preparing the region to deal with the economic challenges, dislocations, and opportunities of the transition to net zero? And what does the private sector need in order to be successful in preparing the region?
AHMED ALI ATTIGA: Well, thank you very much for, first of all, it’s very good to be back here, and with the distinguished colleagues on this panel. Obviously the countries of the region, regardless of whether they are exporters of oil or importers of oil, are facing fiscal space limitations. This is – this is very clear, and it’s getting clearer every day. This brings the role of the private sector to be extremely important in supporting the expansion and the transition that’s happening in the energy spectrum, be it mainstream, downstream, industries, and the power sector. APICORP issues every year an estimate of the investment outlook in the energy sector in the MENA region. And we have seen in the last few years a year-on-year growth in the role of the private sector investments in the energy spectrum. This year now we are at about 22 percent of the total energy bill investments is coming from the private sector.
So I think this trend will only continue. And governments will rely on facilitating the role of the private sector in addressing this challenge. The examples are many. We have seen the types of financing that the private sector brings in this region over the last few years, leading to the most recent IPO by Aramco, which is something that was not thought of just a couple of years ago, let alone ADNOC next door and Aramco also issuing bonds, and going out to the market and issuing bonds, another type of facilitating private sector role. The whole relationship between NOCs and sovereign wealth funds is changing, and it’s taking a different manifestations, which I think will continue to show how the private sector can be encouraged to come.
The renewable energy sector, for example, in countries of the region – particularly Jordan, Morocco, Egypt more recently – have shown also what it takes for the private sector to come. Regulations, incentives, conductive environment for investments, consistency of policies. And the private sector had come. I covered in my previous life with the IFC Jordan quite extensively. When Jordan did its first renewable energy program in the midst of a very, very difficult economic situation at that time – 2014, ’15, ’16. However they did it successfully. And as a result, everybody came – investors, developers, development financial institutions, sovereign wealth funds. And now Jordan has a surplus, actually, in the electricity that’s generated from renewables. So I think this gives a flavor of the role of the private sector, which APICORP – which is the only multilateral financial institution focused on the energy sector in the region – is going to encourage.
MR. LIVINGSTON: You’re certainly playing a very unique and pivotal role, absolutely.
And Meg, let’s talk a little bit about the LNG sector. There have been occasions to talk about natural gas. We’ve already touched on LNG a little bit earlier in the day. But I’m curious from your perspective, how does the LNG sector view the move to net zero? If there is, you think, a kind of cohesive perspective on the part of your industry.
MEG GENTLE: Well, first, David, thank you for having me here today. Again, I think now the third year I’ve been here in Abu Dhabi with the Atlantic Council.
I can talk from the perspective of Tellurian. We’re developing and constructing a 27 million ton export facility on the Gulf Coast of the U.S. And as we think about getting to net zero, I view natural gas and LNG as already part of the solution. We’ll have some emissions throughout, you know, our value chain, but the benefit that we will have into the overall CO2 emissions is actually 10 times the, you know, emissions that we will contribute. And that comes obviously from displacing or replacing dirtier fuels of coal and oil, not only in power generation but also in the transportation sector.
So our next challenge then is to try to get the emissions at the plant and over the life cycle from the wellhead to the ship down to zero. And how do we do that? We really think of that in three primary ways. First, start at the wellhead and make sure that we don’t have emissions of CO2 or of methane at the wellhead. And in the gas wells that we produce, we produce dry gas, so we don’t have flaring. But we do make sure that we have green completions at the wellhead so that we don’t have any methane emissions. And then we get to carbon capture and sequestration. And there are things that we can do at the LNG plant itself to capture carbon. And to the extent we can’t capture that carbon, the second method then is carbon offsets. And so a number of really great projects to offset the impact of carbon.
And then the last piece I would say of the three-legged stool is really policy initiative that we need on carbon pricing. And we’ve really been supportive, including funding policy initiatives to try to develop that in the U.S. What is the right kind of carbon pricing that can incentivize the investment in those carbon capture and carbon offset projects?
MR. LIVINGSTON: Absolutely. Can I do a quick follow up on that? I love the fact that you raised those market-based mechanisms. And since we’re coming off of a – I’ll venture – I’ll go ahead and venture to say, a disappointing outcome at the climate conference that took place at the end of last year in Madrid, where little progress was made on the framework for the trading of allowances under market-based mechanisms, what’s called in U.N. parlance Article 6. How important is progress on Article 6 at the U.N. level? In other words, the very high-level U.N. institutional architecture, how important is that for what Tellurian would like to see develop in terms of a robust market for carbon offset for the crediting of the emissions reductions that you’re looking at?
MS. GENTLE: Like everyone in this room, we are facing a commodity business, right? The energy business is hugely commoditized. And so to make investments in some of these carbon capture or carbon offset projects, that has to be done under a level playing field so that we’re all achieving, you know, a competitive landscape. So progress, whether it’s specifically on U.N. initiatives or on some other collaborative initiative, that has to be global to incorporate cross-border adjustment mechanisms. We have to make progress, I think, as a global community on coming to a carbon pricing mechanism. So I would say yes, it’s absolutely critical.
MR. LIVINGSTON: Excellent. And, Adam, you and KAPSARC have been incredibly articulate and, I would dare say, very effective proponents of the circular carbon economy concept. I see this really taking hold, not only here at our Global Energy Forum, but in other venues of discussion as well across the policy landscape. For those who aren’t that familiar, tell us a little bit about this circular carbon economy concept, and why it’s relevant to this discussion we’re having today about net zero.
ADAM SIEMINSKI: Sure. I’d love to do that, David. And good afternoon, everybody. And to my friends in the region, I think it’s almost evening. It seems like it. It’s been a long day. So masa’a alkheyr.
The whole idea of the circular economy has become, I think, a very important idea from the standpoint of cradle-to-cradle use of materials – you know, can we lower the environmental impact of everything that we do by looking for ways to recycle it through the economy. And at KAPSARC what we said was, you know, there’s a really interesting thing that you could do within the framework of the circular economy, which was reduce, reuse, and recycle. And what we said was, if you added a fourth R, which is remove things like direct air capture, or ultimate storage of carbon, you could think of a carbon cycle or a loop, a closed-loop system where the emissions from carbon can be managed.
And there’s an important aspect of this that is worth talking about. Again, reduce, reuse, recycle and remove. If you think of it that way, then if the world fails to implement the kinds of things that Fatih Birol was talking about this morning and we don’t go to 60 (million) or 65 million barrels a day of oil demand – what if oil demand stays at 100 million barrels a day, what if it goes to 110 million barrels a day – the emissions from that have to be a managed if we’re going to manage the climate challenges that the world faces.
So you could say carbon is not the enemy, it just needs to be managed properly. So the idea is, can you find ways within a circular carbon economy which is really kind of a – it’s just a framework to think about it. It’s a net-zero concept or a net carbon neutrality concept. Can you then say through these four Rs, is it possible to manage the carbon in such a way that you can continue to use the hydrocarbons that are necessary for economic development in a lot of places without creating huge environmental problems?
And so what gets me enthusiastic is I think it’s possible. All right? I mean, reduce is things like efficiency and renewables and nuclear power. Reuse and recycle, I mean, we reuse carbon dioxide. It’s being done right here in Abu Dhabi. Carbon dioxide from the steel plant is being reused to drive hydrocarbon production. And you could convert carbon dioxide into urea and methanol, as an example, or ultimately you could just take it and store it permanently.
If you can do that, then we can get the best of both worlds. The billion people in the world that don’t have electricity can get the hydrocarbons that they need to generate that along with all of the other forms of energy that will be used, and at the same time we won’t be creating the problems associated with carbon dioxide in the atmosphere in terms of raising temperatures. So the idea really for us is one of convincing policymakers and the public that this is a valid concept, that you can do it, that with the proper regulatory and financial incentives that new technologies can address these issues and make it possible for us to continue to have the lifestyles that we like.
MR. AL-SABAH: David, can I –
MR. LIVINGSTON: You absolutely can, and then I’ve got a question for you based on something Adam said just after that.
MR. AL-SABAH: Hopefully it’s going to be the same thing. But I’m really intrigued by what Adam’s saying, because I’ve looked at what KAPSARC has been doing in terms of research, and it’s fantastic.
One of the things that we really have to spend a lot more time, money, effort, elbow grease on is what I call humanity’s next moonshot, and that is how to take carbon and replace gas that’s being used for injection to maintain reservoir pressure right now. It’s being done. It’s being tried in a number of places. But I think the cost right now per barrel is prohibitive, somewhere in the 30-dollar range or something like that. It is too high. But if we can reduce that cost and make it efficient and make carbon injection for maintenance of pressure within traditional oil wells and reservoirs as efficient as gas, then we solve two problems. One, we take carbon out of the atmosphere, and the second is we actually free up a lot more gas that it otherwise being injected that can be used for power generation or even petrochemicals or whatever else that we want to use it for.
What do we need to get that done? I mean, we’re looking at it seriously. Others are. And you mentioned it’s being done in a couple places. But where’s the tipping point where that actually becomes a real part of a solution that’s actually not being looked at right now in the whole scheme of what it takes to get to net-zero, if you will?
MR. SIEMINSKI: Right. So to me the implementation is when analysts and economists have looked at this, they say there’s two ways. One is to put a price on carbon. The problem with that is really pretty obvious, is that you get very unhappy consumers who put on yellow vests and stop all of the traffic in Paris, or create big issues in places like Santiago, Chile, and elsewhere.
Another possibility – and David mentioned it when he was talking with Meg about Article 6 in the Paris Agreement – is if you had a trading system and if you had offsets and if you could find ways to have audited and verified systems, it would be possible for companies to find ways to offset, if they can’t prevent the carbon from flowing out an airline, for example, well, they could find offsets that would take care of that.
I think that in terms of the physical aspects, some of the really good news about using carbon dioxide to maintain and drive reservoir pressures is that there is good engineering scientific evidence that a great deal of that carbon dioxide stays in the reservoir. So you actually are removing it from the atmosphere on a relatively permanent basis.
MR. AL-SABAH: But I mean, you mentioned carbon coming out of the wing of the airplane when it’s flying. I mean, that’s about 2 percent of carbon. I think when you’re talking about tailpipes of cars, again, that’s a small percentage. Combined, they are less than what is coming out of a coal-fired electricity plant worldwide. And we’re not talking enough about that. We’re not talking enough about how to phase out coal in electricity production.
In Kuwait we had crude oil as part of our electricity production, and that was horrible. You would see these black plumes of smoke coming out of these powerplants. We’ve now switched to gas, and we’re importing LNG. But there’s another whole economic situation.
But I think we’re not talking enough about other types. You know, it’s always the tailpipe and the problems with the tailpipe. It’s easier to take carbon out of a smokestack than it is out of a tailpipe.
MR. LIVINGSTON: I’ve heard a lot already about the right policy framework, with the right policies we can do X, with the right policies we can achieve Y. We have a lot of policymakers in the audience, and it’s very important for them I think to hear from this sector what are the prudent policy frameworks going forward.
But we also have a lot of investors in the audience. We also have a lot of people who don’t have the luxury of living in what’s the optimal policy framework, but what’s the most likely political outcome. I earlier in my career cut my teeth at the WTO in the Technical Barriers to Trade Committee where we looked at the EU’s fuel quality directive back in the day. And it was an attempt to punish higher carbon oils and reward lower carbon oils, with one exception: It treated one segment of oil – heavy oil sands coming out of Alberta – separately from all other crude oil and said all other crude oil has the same carbon content.
Now today we see in the EU vigorous debates about the green taxonomy, which is not on the basis of lifecycle emissions assessment of natural gas or of crude oil, but is just about painting with a blanket brush nuclear, natural gas, wind, solar, segments onto themselves. So I guess my question – not for any individual ones of you but for the whole panel – is how do you, as leaders responsible for the bottom lines of your companies, of your organizations, of your institutions, how do you balance painting the picture of how you’ll compete in an optimal policy world versus the realities of politics as they articulate themselves?
MS. GENTLE: I think that the reality of politics is that we are still many, many years from having a carbon pricing system that works. We’re really just starting to seriously talk about it, and it’s going to have to get rationalized on a global or at least international semi-global basis in order for it to work.
We look at CO2 emissions on a full lifecycle basis, so from wellhead all the way to the end of wherever the gas is going. And we know that natural gas has such an opportunity to reduce carbon just from replacing other fuels. And if we look even at replacing coal, or removing carbon from the smokestack as Sheik Nawaf was saying, each 1 million ton of natural gas that gets produced has the potential to remove 3-5 million tons of CO2, which means that if you even just consider the IEA numbers and the gas forecasts to 2030, we have the potential with gas to reduce CO2 emissions by roughly 8 percent from where we are today. So that’s the kind of reality that I think we look at and what makes me passionate about bringing gas to the rest of the world to try to accomplish those kind of missions. And then we continue working with policymakers to try to make that become a reality as well.
MR. LIVINGSTON: Terrific.
MR. ATTIGA: From my perspective as a financier, we very much – and this has become now a global trend – try to finance commercially viable projects first and foremost in this sector – however, with full embracing of the environmental standards that should come with these investments. There’s no excuse for companies anymore, be it in the renewable sector or in the oil and gas sector, to avoid embracing this transition that’s taking place and reflecting it in everything they do.
On the other hand – and maybe we can talk about this later – we called it in one of APICORP’s recent reports myth busting. We have to bust the myth that oil and gas is bad and that hydrocarbon cannot be a partner with environmentally successfully investments. I think the two have to go together. Each side has to contribute to this win-win, at the end of the day, outcome.
Carbon pricing, as Meg mentioned, is something I think that still needs some time, some effort, some convincing, particularly in this region. However, I don’t think – it will be an option in the not-too-distant future.
MR. LIVINGSTON: And you’ve also had some thought leadership at APICORP about how energy efficiency – which is so often overlooked, really – it’s right before our eyes, it’s the proverbial low-hanging fruit, but it’s often overlooked – how energy efficiency can increase risk appetite on the part of the investment community. As a financier, how do you look at that? How do you think about that?
MR. ATTIGA: Certainly. I mean, it’s very simple. Energy efficiency in all its manifestations will make better investments, and that will in return increase the risk appetite for financiers and investors to come in and support these investments and support these projects. So the two goes together. In other words, it’s a cycle where all the pieces have to work together towards a sustainable, if you will, outcome of the transition. The transition in the energy sector is real. This region where we’re sitting has demonstrated more recently that particular – I mean, the largest carbon capture project in the iron and steel industry in the world sits in Abu Dhabi, all right? That’s an example of how efficiency can help.
MR. LIVINGSTON: Excellent. We’ve got an incredibly impressive audience out here, so I’m going to come to you in just a second to start bringing your questions and thoughts into this.
But first of all, I don’t want to let Shaik Nawaf off the hook just yet. I want to pin you down. Are you ready to compete in a world that treats your oil, which might win on the carbon intensity index, just like any other oil? How do you prepare for that future world as well?
MR. AL-SABAH: In a world –
MR. LIVINGSTON You were talking about the advantages that you have in terms of carbon intensity. But what about the markets in which you’re selling that product into don’t recognize that carbon intensity advantage?
MR. AL-SABAH: In the end, if there is no recognition of that carbon intensity, it comes down to the price, and the price we win easily. So I don’t think that regulation was going to make the difference here. Again, it’s going to be market dynamics.
Here, I appreciate what Meg is saying, and certainly if there is a movement towards regulation of carbon in a certain way, that Meg and others should be part of that discussion and help craft it in a logical and sensible way so you don’t end up with, for lack of a better term, cockamamie ideas that come out of various other places.
But you also then end up with an environment where you can produce hydrocarbons that are sensible from a carbon perspective, but then if you’re not going to do that, if you’re going to paint them all with one brush, we’ll win on the price. I keep saying – and I see Halle Mycroft (ph) over here; she’s heard me say this a couple times – the last barrel of oil on Earth is going to be produced right here. It’s going to be produced somewhere between Saudi Arabia, Kuwait, the Emirates, almost certainly.
And how do we make sure that we maintain a position of dominance? Whether you’re in a 100 million-barrel market, 110 million-barrel market, or even at the 60 million, as you mentioned earlier today, in any scenario there, these countries will be producing that oil. It’s not that we’re going to lose that production. If other countries go off of because of price, cost element, because of a carbon element – it’s perceived to be a dirtier barrel than ours – then we’re essentially the ones left standing.
Now we just need to make sure that we work together with regulators to ensure that we have sensible approaches to how to recognize those barrels. A heavy oil barrel in Kuwait is nowhere near the carbon intensity required of an oilsands project in Canada or any other place. I know Canada because we’re invested in Canada. We know Canadian production, albeit it from the shale side. Again, it’s nowhere near the type of water that you need for shale production in a desert in Texas or other places.
But we do have challenges of our own, and we need to make sure that the research and technology that we deploy to our reservoirs through the excellent work that KAPSARC is doing or others in the region are doing – and KISR and other places in Kuwait that have done some of this research – we need to make sure that that type of research is tailor-made to the types of reservoirs that we have to position ourselves to be essentially the last man standing on this.
MR. LIVINGSTON: Absolutely.
If you have a price advantage and you have an environment advantage, and let’s assume that all things being equal that a lower price of oil globally is going to be healthier for long-term oil demand, are you in accord with the current position being taken by OPEC-plus?
MR. AL-SABAH: First, yes, we do have a price advantage. We do have a carbon advantage. The third assumption is one that I’m not sure I would subscribe to. It is what the price of oil should be. We need really want to set that. As long as you end up in a band of reasonableness where economic growth is not impacted and the producing countries can get a stable reliable rent for their hydrocarbons, we’re fine with that.
OPEC-plus production right now, again, this is more of a short-term thinking. The way we look at it right now, yes, we need to do some management to maintain balances in the markets over the shorter period of time. But we’re looking at decades. When we’re talking about the subject of this panel, we’re talking about decades. And decades, we are well-positioned for that. We actually need to invest more. We’re going to invest hundreds of billions of dollars in Kuwait – and I know the Emirates are doing the same thing, and the Saudis as well – to grow production, certainly to maintain that. And nobody else really can do that other than us.
MR. LIVINGSTON: Absolutely.
MR. : David.
MR. LIVINGSTON: Adam.
MR. SIEMINSKI: If I could, I’m obviously not running an oil company, but I am running a think tank. But there was a very interesting discussion here today with Crescent Petroleum, the Atlantic Council and the Eurasia Group trying to get at this issue of what companies could actually do to manage a transition towards cleaner fuels and a net-zero economy. And they had five basic policies. And I can do these pretty quickly, and they’re worth thinking about.
The business model, a net-zero business model is fine, but it’s got to be profitable. I mean, the shareholders are going to demand that. The second thing is, it really, really, really would help – and here’s where think tanks could come in – there’s got to be government-approved and auditable, scientifically fact-based metrics so that we can measure the things that we need to measure. The third thing is, is that everybody really has to get behind the idea of circular carbon economy. It can’t be greenwashing. It can’t be a smokescreen. It’s got to involve real investment in technology, financing, and enabling policies. The fourth thing that has been mentioned several times is Article 6 trading under the Paris Agreement has to be part of this or it will fail.
And then finally – and this is critically important – and for everybody in the room, you need public acceptance for these ideas. You need the public. You need the employees of the companies to accept that all of the solutions have to be tried. Again, if you look at that slide that Fatih put up, any one thing is not going to do it. You can’t just pick your favorite thing. You’ve got to get behind all of the possible solutions.
And it’s not just the public and the employees. I mean, I’ve heard I can’t tell you – and I’ll bet you there are people who are going to shake their heads yes – that you’ve got children who are incredibly green and they wonder what you’re doing in the oil industry or the gas industry or the coal industry, what you’re doing and being able to explain to them how we need multiple solutions and how we’re going to achieve those is going to be critical to the success of getting this done.
MR. LIVINGSTON: Terrific, thank you.
And I want to jump on on a follow-on on that, but first I want to fulfill my promise to the audience. Do we have any initial questions? Do we have any questions? Yes, I see two. If we can get a microphone, first back here, then we’ll come to the front.
Q: Yeah, hi. Is that one?
MR. LIVINGSTON: Please identify yourself as well.
Q: Yeah, I’m Paul Jackson from Invesco.
I don’t really know where to start. I think there’s an incredible degree of overconfidence that we’re going to get anywhere near keeping the temperature change below 1 ½ degrees. That is gone. That has gone. Even if we didn’t have any emissions from today going forward, we are going to go well beyond that sort of temperature change. So what we’re talking about is how much further we go beyond that, and I would say how much further we go beyond 3 degrees. I don’t think we’re talking 1 ½ . We’re talking 3 degrees.
Now climate change is probably – I think it has to be the biggest externality that has ever existed. We’re creating climate change because we are not made to face the costs of what we’re doing. So when companies are saying it wouldn’t be profitable to do this, if we were going to the right thing it wouldn’t be profitable, well, it’s not profitable because they are not made to face the true costs.
And that is where carbon pricing comes in. You solve externalities either through pricing mechanisms or through regulation. And I would argue the most efficient way of doing it is through the pricing mechanism, and we as a world have just got to make a massive effort to get a proper carbon pricing scheme, and then that allows the markets to make the choices efficiently. We’re clearly not there.
There is a simple technology that has existed for a long time that will allow us to bridge the gap until we get that carbon pricing, and will allow technology to catch up, and that simple technology is the tree. And I haven’t really heard much discussion of reforestation over the two days that I’ve been here so far. But what do you think can be done? What are you doing to fill this gap over the next couple of decades, which I think can be filled by just massive reforestation efforts? Honestly, I think it’s the only solution that we have given the lack of success in terms of carbon pricing and given the lack of progress that we’re making in other areas. What are you doing about those sorts of initiatives?
MR. LIVINGSTON: Natural climate solutions. Where does it come into your strategy?
MS. GENTLE: So I can speak about this a little bit because we have looked at planting trees, and in fact do intent to begin a tree reforestation initiative. And if we consider only the carbon from the LNG plant and not the carbon from the entire system on a net basis, where natural gas is actually reducing carbon, so we look only at the plant, we estimated that it may cost us well over a billion dollars of investment in land and tree planting in order to achieve net zero from that strategy alone.
So it is a significant investment, and we will definitely invest in a portion of that, and we have to make some decisions on what portion is that. And is it actually trees, or are there grasses and shrubs that are actually better carbon, I guess, capturing than trees which are a long lifecycle of planting? And then what other strategies can we put together with that that capture carbon at the plant itself for maybe a more cost-effective investment? So I absolutely agree with you that it’s a very important piece of the strategy and something that energy companies are starting to employ today.
And then I would add maybe one additional idea since we all know that the carbon pricing like policy generation will take some time to become rationalized, and that is they are already seeing today incentives for companies to make these kind of investments, because if you follow the capital markets and capital allocation, we now have over a trillion dollars of capital that are in various funds that are developing criteria for investment based on ESG criteria, where I would think that E is actually the biggest part of the way that they’re considering which companies to invest in. And Tellurian as a public company, we can feel that in European funds and now more and more in U.S. funds, that capital is getting rationalized on this basis. So I’m actually hopefully for just overall society to begin to rationalize or to create a carbon pricing that’s not necessarily regulation. It’s simply capital investment.
MR. LIVINGSTON: Cost of capital filling the role that carbon pricing should have in an ideal world, absolutely.
I want to – residual emissions that we have can be dealt with through natural climate solutions, natural carbon sinks. Also, another technology set that Adam mentioned earlier which has been gaining increased interest, direct-air capture – direct-air capture. Who here on the panel thinks that will likely be or has to be a part of the toolkit that you’re going to be – that you’re going to employ? And who thinks it’s a red herring, too expensive?
MR. AL-SABAH: Has to be. I think we were all saying everything has to be part of the mix.
MR. SIEMINSKI: I absolutely agree with the everything. All possible solutions are going to be necessary to make this, yes.
MR. AL-SABAH: I mean, we’re going to be struggling to keep up even if we deploy all possible solutions, so.
MR. SIEMINSKI: And natural sinks are going to play a role in that, so trees –
MR. AL-SABAH: Mangroves, by the way, probably –
MR. SIEMINSKI: Right.
MR. AL-SABAH: As far as I understand, mangroves capture more carbon than even trees do.
But yes, I – I don’t know enough about how much the technology has developed on direct-air capture. I understand it’s – you know, last few years it had been sort of a fool’s errand of investment. But you never know. We were – we spent decades drilling through shale rocks and saying that we can’t get – we can’t extract hydrocarbons out of that, and then someone figured it out. So same thing here.
MR. LIVINGSTON: We had a question here at the front as well. Let’s take that one.
Q: Thank you, David. It’s been an outstanding presentation, distinguished panelists. This is Waleed Samali (ph) from Saudi Arabian national oil company, Saudi Aramco.
Two brief questions to bring the discussion closer to this part of the world, closer to home. What do you think – this is the first question. The top five critical success factors for establishing – (inaudible) – institutionalized, and in fact for public-private partnerships toward net zero.
MR. ATTIGA: Towards what?
Q: Towards net zero, public-private partnerships. Many players, many stakeholders. What’s the recipe for success for this part of the world to make an impact at the collective national level?
The other question is – and this is people who work with academic institutions around the world have this feeling that academic – and some of them are top academic institutions – they have the suspicion of all the efforts that organizations, corporates are doing when it comes to net zero. What do you think – and this goes among the faculty, among the leader, principal investigator, researchers, and at the institutional level. And this is very counterproductive for any collaboration between these international companies and these academic organizations or universities. What do you think are trust-building measures that need to put in place to make sure that the message of all the effort that’s being done is completed on the benefit globally? There’s still fear and suspicions, and that sometimes will reflect in counterproductive actions from academia toward industry when it comes to climate change and issues like it. Thank you very much.
MR. ATTIGA: Maybe I can take the first question on the public-private partnership schemes that have proved a success. You’re absolutely right, this challenge cannot be met by any side alone. And public-private partnerships, particularly from the financing side, are schemes that have – that have shown effectiveness. Each side – as you know, the public-private partnership is the allocation of risks. Each side should take – should tolerate the risk that they are most suited to tolerate. And this is how – this is how it has succeeded in many countries.
Renewable energy, again, is an example. Investors and financiers came to the countries when policies were soundly put, when the risk mitigation factors were in place, when investors brought bankable projects for financiers to support, when the governments gave land and other incentives in a manner that helps the overall outcome. So I think this is just, you know, a trend that ought to be supported in order to see much more private-sector involvement in this – in this area.
On the second question, maybe Adam can –
MR. SIEMINSKI: Well, I think that collaboration between businesses and universities and think tanks generally is probably a really good idea. In Saudi Arabia, KAUST and KFUPM, King Saud University, and others I think are going to play a big role in this. KAPSARC would like to try to provide some of the fact-based guide to what all this means and try to do it in a way that’s understandable by everybody. But you know, here in Abu Dhabi, Khalifa University – and KAPSARC has been doing work with Khalifa University on issues like this. I think it’s going to be critical to the idea of how you get public acceptance of the ideas that are necessary to make something like this work.
MS. GENTLE: I think if I could just add one maybe little bit of levity even, we’re losing the PR battle way before the university and the think tank because, coming from Houston, Texas – a very energy-friendly city – when my kids were as young as five years old the kindergarten teachers were talking about the, you know, hydrocarbons being bad, and so my kids were coming home and encouraging me to get out of the natural gas business. (Laughter.)
MR. SIEMINSKI: I predicted it. (Laughs.)
MS. GENTLE: So even at five years old, there is a lack of understanding, right, that 85 percent of the world’s energy is supported by hydrocarbons. And we focus a lot on the perfectly efficient theories of renewable energy – and I think I can say for everyone in the hydrocarbon industry we want to support the proliferation of renewables – but that success has to happen in partnership, and it’s not going to be 100 percent renewables in the next decade.
MR. ATTIGA: As another fact, my colleague Dina, sitting here, was just telling me just before the panel that her 10-year-old daughter was questioning her why she’s working in APICORP. And the answer also had to be, OK, oil is not as bad as it – as it looks.
But I want to – I want to end, if you allow me, David, with emphasizing the point that negative sentiment on the hydrocarbon sector – not only oil, but also gas, which is one of the cleanest source – I think needs to be – needs to be balanced. It’s not only depriving the sector from access to finance in many instances, but also talent and human capital. And maybe some of the CEOs of – in the industry can maybe reflect on that. So I think success stories of how to marry both the environmental concerns with the role of the hydrocarbon have to be much more advocated.
I gave an example about a project here in Abu Dhabi. Another project next door in Oman is – just to get the numbers right, it’s the Miraah project in Oman, which is one of the largest solar projects, that’s generating 6,000 tons of steam a day for an enhanced oil recovery operation in the Amal oilfield in Oman. So I think these success stories have to start coming in order to balance the discourse.
MR. AL-SABAH: I think that’s what we were saying, I mean, that how do we – when Oman, for steam for generation, for heavy oil, we’re doing the same exact thing in Kuwait. And as we look at secondary recovery, we really need to make sure that we have enough investment there to reduce the intensity of the energy that we use to produce those hydrocarbons. Yes, you’re –
MS. LIVINGSTON: I know we’re at time. I’m going to – I’m going to risk my own livelihood to anger the gods because I see two of the smartest people I know in the audience with questions that I know are going to be good. I’m going to collect both of them together and then throw them at the panel to finish this off with a bang.
First, let’s start with Greg Sharenow from Pimco.
Q: I feel uncomfortable after that introduction. (Laughter.)
So voluntary emission reduction is something that a lot of people are looking at in terms of investing. But when we – in carbon offsets. When we look at the green bond market and SDG bond market, we’re making a lot of efforts in investment to try to create some standardization, to create a larger and more transparent market. But the VEER (ph) market, I think, in incredibly opaque. Have you done any research, Adam, into how to – what we would need to do to start improving the VEER (ph) market?
And then second, for those who are considering what means to reduce their carbon footprint, have you ever approached an airline and say, have your customers pay an extra dollar to help finance your carbon capture project and make it a circular economy through making one company who’s trying to reduce find someone who can actually do it?
MR. LIVINGSTON: And then let’s swing over here to Jason Bloom from Invesco as well.
Q: Thank you.
And so just briefly, Meg, you made some really interesting comments around some very thoughtful things you’re doing to reduce emissions at the well head, for example. I suspect that that is not necessarily the industry average approach in the U.S. But I’d love to hear if you think you’re doing something special and if – you also sort of hinted at that institutional investors are starting to pay attention to these issues about the risks, I guess, inherent in your business practices and how you’re – how well you’re addressing them. And then I loved your idea about the idea of the costs to capital regulating this because if we can do that you can sort of circumvent the incredibly abrasive political process that seems to really bog these issues down. So I’d just love to hear your thoughts on that.
MS. GENTLE: Do you want to go with the –
MR. SIEMINSKI: Well, in the financing area, I mean, I think that it’s – we’re back to all solutions are going to be required in terms of how the money is going to come to do this. I think it’s going to require a government framework. If you think about airlines, an airline might be able to – if they felt they were under enough pressure from shareholders they might be able to do a bilateral deal with somebody for an offset. But I think that offsets are going to make much more sense under a rigorous auditable program along the lines of Article 6 of the – of the UNFCCC agreement.
In general, I think, to make this happen it’s going to require a huge educational effort, you know, on the part of everybody, maybe even starting with the grade schools again to – you know, it’s, like, to emphasize the amount of energy that’s being used and how it has improved people’s health and their economic wellbeing over a hundred years and that, yes, we have climate challenges that have to be addressed but they’ve got to be addressed in a sense – in a way that’s affordable and still provides opportunities for people to use it.
Keep in mind that the U.N. itself – and they’re very green – the sustainable development goal number seven is clean affordable modern energy for all, and that – you’re not going to just do that with one thing. You can’t just do that with renewables alone. Not now. I mean, maybe in a hundred years or 50 years it might be possible. But I suspect, as Shaikh Nawaf said earlier, that the hydrocarbons and oil is going to be with us for a long time.
MR. LIVINGSTON: Meg?
MS. GENTLE: So on the green completions, we produce gas in the Haynesville field, which is very, very dry gas. It is a shale gas so we do frack the wells, and if you don’t have the right technology at the well head when the well is fracked that’s when, you know, gas starts to have enough pressure to be released into the well bore, and so some of the methane escapes as you’re capping the well before you get it into production.
So there’s no regulation in the U.S. that says that you have to put in the completion technology so that that methane escapage is zero. That’s not mandated by regulation. So we bought an asset about two and a half years ago and we decided that we wanted to be able to show a track record on our, you know, for a pretty small investment that said we took over this field and we’re going to improve our carbon footprint, you know, from day one year over year. So we’re going to take what the operator did before and make improvements.
And we did that in all of the completion valves that were on existing wells and then on the wells that we drilled. So that technology is available. When you’re asking is it the industry norm, it’s available and many operators do employ it. It’s not mandated by regulation so it is an added cost on capital investment that we made the decision to do.
Aside from being a great citizen and doing the right thing, we were already starting to get this capital pressure, right, from different funds asking us, you know, what are you doing to be able to qualify as an environmentally friendly company, and just the natural gas label we’re already up against a challenge.
So we recognized that we needed to have wins like this that says we go above and beyond regulation to make the investments necessary to make improvements, and so that’s where, you know, you can already see how that, like, capital allocation is putting pressure on companies.
In the U.S. today, the capital flight from the E&P sector is really staggering and we even expected that as we go into 2020 there’s been such a starvation of capital into E&P that we would see, you know, money coming back into the E&P companies, and actually just from, you know, the S&P and, you know, on the Nasdaq that isn’t happening yet.
So, you know, in terms of the first few days of 2020 being a harbinger, I would predict that there’s, you know, more and more and more focus on environmental success in energy companies to attract that capital.
MR. LIVINGSTON: Terrific. Anyone else? No? Perfect. Perfect.
That was a(n) excellent way to end a really nice synopsis of this whole panel, which I think gave us reason to believe that even if we don’t get the policy developments in the near term that we – that we hope to get for the move to a net zero emissions economy, the private sector will be – will be paying attention. The private sector will be scrutinizing and, truly, the best-in-class players in each sector will be the ones that win out over the coming decades.
Please join me in thanking and applauding this distinguished panel, this thoughtful conversation. (Applause.) Thank you, all, very much. And now I’ll invite you to go and enjoy the rest of your day. Your work here is done.
Please stick around in the room right now because as our distinguished panelists exit the stage we’re going to be transitioning from a discussion on the net zero horizon and the debates and discussions therein all the way to deliberating over the future here in the region for a key part of many net zero emissions strategies, and that’s nuclear power and the role that the 123 Agreement and the consequential and important developments that it has engendered here in the UAE and in the region; what is the – what is the past, what are the achievements, as we look backwards, and what is the future, as we look forward, for this important technology here for the region and the world and beyond.
Let me welcome now to the stage my colleague, my friend, our deputy director of our Global Energy Center, Jennifer Gordon. Please join me in welcoming her. (Applause.)